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Azure Midstream Partners, LP Reports Sale of Processing Plant and Second Quarter 2016 Financial Results

DALLAS, Aug. 8, 2016 /PRNewswire/ -- Azure Midstream Partners, LP (OTCQB: AZUR) ("Azure" or the "Partnership"), announced the sale of a processing plant and gathering line in East Texas and reported financial and operating results for the three and six months ended June 30, 2016.

Sale of Processing Plant to Align Midstream Partners

Effective August 4, 2016, the Partnership executed an agreement for the sale of the 100 MMcf/d Panola I processing plant and Murvaul pipeline to Align Midstream Partners for $44.9 million in cash proceeds. Wells Fargo Securities, LLC and Evercore served as financial advisor to Azure on this transaction.  The Partnership continues to own and operate 210 MMcf/d of natural gas processing capacity in East Texas and has over 950 miles of gathering pipeline in East Texas and North Louisiana. 

"The transaction announced today, is unique in that it allows us to reduce our debt by $41.0 million and effectively increase our annual EBITDA run rate by about $1.5 million through the elimination of fixed costs associated with the plant and pipeline which was sold. We appreciate the efforts of both our transaction team and the Align folks and wish them the best," said I.J. "Chip" Berthelot, II, Chief Executive Officer.

Second Quarter 2016 Results

Azure's net loss was $8.4 million for the quarter ended June 30, 2016, compared to pro forma net income of $1.7 million for the same period in the prior year.

Adjusted EBITDA for the quarter ended June 30, 2016 was $0.8 million compared to pro forma adjusted EBITDA of $11.5 million for the second quarter of 2015.  Deferred revenue associated with our minimum revenue commitment agreements and several minimum volume commitment agreements was $2.0 million for this quarter. These amounts are billed to our customers on an annual basis and are included in our distributable cash flows for the amounts we are entitled to receive for the quarter.

"We have accomplished a significant milestone in every quarter of 2016, each of which continue to better position the partnership to execute on future strategic alternatives," said Mandy Bush, Chief financial Officer. "Beginning with the AES settlement in Q1 2016 which eliminated roughly half of the outstanding units and facilitated a debt reduction of $15 million; followed by a cost reduction program in Q2 2016 that will generate $2.5 million in annual savings; and most recently, the significant de-leveraging of the revolver and corresponding cost savings associated with the Panola plant sale."

Adjusted EBITDA and distributable cash flow are explained in greater detail under "Non-GAAP Financial Measures," and reconciliations of these measures to their most directly comparable GAAP measures are included in the tables at the end of this release.

Gross margin for the gathering and processing segment for the second quarter 2016 was $6.9 million compared to $15.2 million in the second quarter of 2015. Gathered gas volumes were 246 MMcf/d and gas processed volumes were 62 MMcf/d for the second quarter 2016.  Gathered gas volumes were 338 MMcf/d and gas processed volumes were 185 MMcf/d for the second quarter 2015. 

The Partnership's second quarter 2016 recurring operating expenses were $3.6 million, recurring general and administrative expenses were $2.8 million, depreciation and amortization expenses were $3.6 million, and interest expense was $3.2 million.  Debt, net of cash, was $202.2 million as of June 30, 2016, and proforma for the paydown associated with the plant sale is $161.2 million

As discussed in the first quarter 2016, the execution and completion of the AES restructure agreement accelerated a letter of credit which on April 1, 2016 was used to reduce the outstanding debt $15.0 million. Additionally, effective April 1, 2016, NuDevco surrendered to the Partnership 1,939,265 common units, 8,724,545 subordinated units and 10 IDR units of the Partnership which were held by NuDevco and its subsidiary. This reduced the number of outstanding units of the Partnership from approximately 21.7 million units to 11.1 million common units. In return, the Partnership agreed to terminate both the gathering and processing and transloading agreements coupled with a mutual release of future claims with AES, and AES assigned all of its rights and interests in third party contracts to the Partnership.

Delisting of Common Units and Trading of Common Units on the OTCQB Market

As a result of the decrease in outstanding units and the depressed share price, on June 6, 2016, the Partnership was formally notified by the New York Stock Exchange ("NYSE") that the NYSE had delisted the Partnership's common units. These proceedings are a result of the Partnership's failure to comply with the continued listing standard set forth in Section 802.01B of the NYSE Listed Company Manual that required the Partnership to maintain an average global market capitalization over a consecutive 30-day trading period of at least $15.0 million for the Partnership's common units.  The NYSE suspended the trading of the Partnership's common units at the close of trading on June 3, 2016.

On June 6, 2016, the Partnership's common units began trading on the OTCQB Market under the same ticker symbol used previously on the NYSE "AZUR." The Partnership will remain subject to the public reporting requirements of the SEC following the trading of its common units on the OTCQB Market.

Second Quarter 2016 Conference Call and Webcast

Azure will host a conference call to discuss second quarter 2016 results at 11:00 am CT (12:00 pm ET) on Monday, August 8, 2016.

Interested parties can listen to a live webcast of the call from the Events & Presentations page of the Azure Investor Relations website at http://investor.azuremidstreampartners.com/phoenix.zhtml?c=253822&p=irol-calendar.  An archived replay of the webcast will be available for 12 months following the live presentation.

To dial by telephone, please preregister by following the following link: https://level3.cwebcast.com/ses/bsTj78jNUh6KEtgUsPRyVg~~. After registering for the event, you will receive an email with your personal access information.

 

 

AZURE MIDSTREAM PARTNERS, LP

SELECTED BALANCE SHEET DATA

(Unaudited)

(In Thousands, except unit amounts)




June 30, 2016


December 31, 2015








Selected Balance Sheet Data:






Cash and cash equivalents

$                       12,359


$                   7,511



Total assets

418,371


563,964



Long-term debt, net of deferred borrowing costs

212,231


228,474



Total partners' capital

$                     181,482


$               316,447








Azure Limited Partners' Capital:






Limited partner units outstanding June 30, 2016

11,124,953


21,769,199






















 

 

AZURE MIDSTREAM PARTNERS, LP

SELECTED STATEMENT OF OPERATIONS DATA

(Unaudited)

(In Thousands)



Three Months Ended


Six Months Ended



June 30,


June 30,



2016


2015 (1)


2016


2015 (1)


Total operating revenues

$               10,838


$               21,466


$               23,519


$               38,784


Operating expenses









   Cost of natural gas and NGLs

3,970


4,139


7,300


7,121


   Operation and maintenance

4,379


3,789


8,378


8,129


   General and administrative

3,732


3,977


6,068


12,450


   Non-cash equity based compensation

318


-


742


5,005


   Asset impairment

-


-


107,477


-


   Depreciation and amortization expense

3,598


5,233


9,588


8,467


Total operating expenses

15,997


17,138


139,553


41,172


Operating (loss) income

(5,159)


4,328


(116,034)


(2,388)


  Other (income) expense, net

(14)


-


81


-


Interest expense

3,153


1,980


6,154


2,808


Net (loss) income before tax

(8,298)


2,348


(122,269)


(5,196)


Income tax expense (benefit)

93


646


(307)


727


Net (loss) income

$              (8,391)


$                 1,702


$          (121,962)


$               (5,923)


 

(1)

The pro forma income statement for the three and six months of June 30, 2015 presents the full six months of the historical Marlin business and includes the impacts of the business combination and the contribution of the Legacy System as of the closing of the Transactions.  The pro forma income statement does not include the effects of the ETG contribution.

 

The following table presents a reconciliation of net income (loss) to Adjusted EBITDA and DCF for second quarter 2016 and pro forma three and six months ended June 30, 2015.

 

AZURE MIDSTREAM PARTNERS, LP

NON-GAAP FINANCIAL MEASURES

(Unaudited)


(In Thousands)

Three Months Ended

June 30,


Six Months Ended

June 30,



2016


2015 (4)


2016


2015 (4)

Net income (loss)

$                 (8,391)


$                1,702


$          (121,962)


$               (5,923)

Add (deduct):








Interest expense

3,153


1,980


6,154


2,808

Income tax expense

93


646


(307)


727

Depreciation and amortization expense

3,598


5,233


9,588


8,467

Asset impairment

-


-


107,477


-

Non-cash equity based compensation

318


-


742


5,005

Other adjustments (1)

2,044


1,864


2,225


8,969

Adjusted EBITDA

$                   815


$               11,425


$                3,917


$               20,053

Deduct:








Cash interest expense

(2,547)


(1,708)


(5,121)


(2,446)

  Cash taxes

(23)


(225)


(30)


(306)

  Maintenance capital expenditures

(94)


(292)


(149)


(901)

Adjustments related to MRC/MVC shortfall payments (2)

1,992


-


3,956


-

Distributable cash flow

$                    143


$                 9,200


$                 2,573


$               16,400

















Distributions to limited partners (3)

$                          -


$                 8,053


$                        -


$               14,685

Distributions paid per limited partner unit

$                          -


$                   0.37


$                        -


$                   0.74

Distribution coverage ratio



1.14x




                  1.1x










 

(1)

Other adjustments is comprised of non-recurring and non-cash items, including: (i) non-recurring expenses associated with transactions, (ii) severance payments, (iii) debt issuance costs, and (iv) non-cash volumetric natural gas imbalance adjustments.



(2)

Deferred revenue associated with our minimum revenue commitment ("MRC") agreement and several minimum volume commitment ("MVC") agreements.  We include a proportional amount of the expected MRC/MVC cash receipts in each quarter in respect of the annual period for which we actually receive the payment to ensure our DCF reflects the amount of cash we are entitled to receive on an annual basis under these MRC/MVC agreements.  These adjustments have not been billed to our customers and are not recognized in our unaudited condensed consolidated financial statements.




In previous releases and SEC disclosure, the Partnership included adjustments for shortfall payments in adjusted EBITDA.  The Partnership has updated the classification of this non-GAAP adjustment to distributable cash flow to better align presentation to the liquidity measure.



(3)

The Partnership has suspended the distribution for the quarterly periods ended March 31, 2016 and June 30, 2016.



(4)

The pro forma results for the three and six months June 30, 2015 presents the full six months of the historical Marlin business and includes the impacts of the business combination and the contribution of the Legacy System as of the closing of the Transactions.  The pro forma income statement does not include the effects of the ETG contribution.  We view Pro Forma Adjusted EBITDA and Pro Forma DCF for the second quarter of 2015 as the key financial metrics used to compare the performance of the combined Partnership as compared to the second quarter of 2016.

 

 

AZURE MIDSTREAM PARTNERS, LP

SELECTED OPERATING DATA

(Unaudited)



Three Months Ended


Six Months Ended


June 30, 2016


June 30, 2015


June 30, 2016


June 30, 2015


Average throughput volumes of natural gas (MMcf/d) (1)

 

246


 

338


253


353


Average volumes of processed gas (MMcf/d)

 

62


 

185


64


186


Transloading facilities (BBls/d), primarily MCV volumes

 

-


 

22,496


-


22,512


 

(1)

Average throughput volumes reflected for June 30, 2015 represent six months of the Legacy and ETG Systems and four months of Marlin.

 

About Azure Midstream Partners, LP

Azure Midstream Partners, LP, headquartered in Dallas, Texas, is a fee-based, growth oriented limited partnership formed to develop, operate, and acquire midstream energy assets. The Partnership provides natural gas gathering, transportation, and processing services; as well as NGL transportation and crude oil logistics services. The Partnership's assets include 963 miles of gathering lines in the Shelby Trough sub-play of the Haynesville Shale and the horizontal Cotton Valley play located in east Texas and north Louisiana that are capable of gathering 1.9 Bcf/d. The Partnership also has three natural gas processing facilities with 210 MMcf/d of cumulative processing capacity located in the Panola, San Augustine and Tyler Counties of Texas, two NGL transportation pipelines that connect its Panola County and Tyler County processing facilities to third party NGL pipelines capable of transporting 20,000 barrels per day, and three crude oil transloading facilities containing six crude oil transloaders with a combined capacity of 31,200 Bbls/d.

Additional information about Azure Midstream Partners, LP can be found at www.azuremidstreampartners.com.

About Azure Midstream Energy, LLC

Azure Energy is a midstream company with a focus on owning, operating, developing and acquiring midstream energy infrastructure in core producing areas in the United States. Azure Energy owns 100% of Azure Midstream Partners GP, LLC, the Partnership's general partner, and 90% of the incentive distribution rights in the Partnership. In addition to its ownership of the Partnership, Azure Energy provides natural gas gathering, compression, treating and processing services in north Louisiana and east Texas in the prolific Haynesville and Bossier Shale formations.

www.azuremidstream.com

Use of Non-GAAP Financial Measures

We report financial results in accordance with GAAP. We also present adjusted EBITDA and distributable cash flow each of which are non-GAAP financial measures. We define gross margin as total revenues less cost of natural gas and NGLs. We define Adjusted EBITDA as net income (loss), plus interest expense, income tax expense, depreciation and amortization expense, certain non-cash charges (such as non-cash equity based compensation, impairments, gains and losses on the sale of assets), transaction-related costs and selected charges that are unusual and non-recurring; less interest income, income tax benefit and select gains that are unusual or non-recurring.

We define distributable cash flow as adjusted EBITDA plus cash interest income, less cash interest paid, income tax expense and maintenance capital expenditures. Our definitions of these non-GAAP financial measures may differ from the definitions of similar measures used by other companies. Management uses these non- GAAP financial measures in making financial, operating and planning decisions and in evaluating our financial performance. Furthermore, management believes that these non-GAAP financial measures may provide users with additional meaningful comparisons between current results and results of prior periods as they are expected to be reflective of our core ongoing business. These measures have limitations, and investors should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Reconciliations of GAAP to non-GAAP financial measures are attached to this release.

Forward-Looking Statements

This press release contains forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. In particular, statements, express or implied, concerning future actions, conditions or events, future operating results or the ability to generate revenues, income or cash flow or to make distributions are forward-looking statements. The forward-looking statements in this press release include statements regarding Azure and its affiliates, including statements about (1) the benefits of the recent transactions described herein, including Azure's ability to successfully make future acquisitions, to maintain or increase future distributions, and to capitalize on certain commercial and operational synergies, (2) future expectations and projections of results of operations or financial condition (3) the anticipated financial performance of Azure, and (4) our ability to comply with the restrictions contained in the agreements governing our debt. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future actions, conditions or events and future results of operations of Azure may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond Azure's ability to control or predict. These statements are necessarily based upon various assumptions involving judgments with respect to the future, including, among others, conditions in the capital and credit markets; the ability to achieve synergies and revenue growth; national, international, regional and local economic, competitive and regulatory conditions and developments; technological developments; inflation rates; interest rates; the political and economic stability of oil producing nations; energy markets; commodity prices; weather conditions; environmental conditions; business and regulatory or legal decisions; the timing and success of business development efforts; terrorism; and other uncertainties. In addition, an extensive list of specific material risks and uncertainties affecting Azure is contained in its 2014 Annual Report on Form 10-K, as amended, and in our other public filings and press releases. There is no assurance that any of the actions, events or results of the forward-looking statements will occur, or if any of them do, what impact they will have on Azure's results of operations or financial condition. Because of these uncertainties, you are cautioned not to put undue reliance on any forward-looking statement.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/azure-midstream-partners-lp-reports-sale-of-processing-plant--and-second-quarter-2016-financial-results-300310156.html

SOURCE Azure Midstream Partners, LP

Steven C. Sullivan 518-587-5995